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January 22, 2008

Tying Odysseus to the mast

There is a well-known, difficult-to-solve motivation problem: keeping a commitment to yourself. Nearly everyone experiences this in one form or another: "I'm going to diet until I lose 25 pounds". "I'm going to get more sleep" (honest, right after I finish typing this post). "I'm never going to smoke another cigarette." John William Waterhouse's 'Odysseus and the Sirens'

In Homer's epic, when nearing the Sirens whose entrancing song would lead men to dash their ships on the rocks, Odysseus had his men tie him to the mast and plug their ears with beeswax so they could hear neither the Sirens, nor his orders to doom them (all of this because he was curious and couldn't resist listening himself!).

There is a well-known story among economists that Nobelist Thomas Schelling advised those who wanted to diet: "Write a large check to the American Nazi Party and put it in an addressed envelope. When you break your diet, mail it." (Steven Levitt writes that he heard the advice first-hand.) This sensible scheme to increase our incentives to stick with a commitment suffers the problem of a bit of circularity: if you decide to break your diet (or other) commitment, what is to stop you from breaking your commitment to mail the check?

Yale economists Ian Ayres (a classmate of mine while getting our Ph.D.s) and Dean Karlan (also an MIT grad) have started a Web-based company to help implement this tempting but difficult to implement scheme: StickK.com. The scheme is pretty simple: mail them the check and they will hold it in escrow, and if you break your commitment will mail it for you.

"But what", you say, "will force me to let them know I broke my commitment"? Here's where the time-honored mechanism of a trusted-third party referee comes in: set up your commiment in a way that can be verified, and then have a friend or other trusted third-party monitor you, and agree to notify StickK.com if you break your promise.

(Yes, yes, of course: what's to stop you from offering your buddy half of the money if she doesn't report you? Isn't recursion fun?)

This is a fun example of a principal-agent problem: you are the principal and the agent, and you have what amounts to a hidden action problem. That is, you cum principal can't enter an enforceable contract with you the agent to ensure performance because the agent can take an "unobservable" action: instructing you the principal to not enforce. The third-party mechanism transforms this into a symmetric information problem with verifiable, enforceable action.

(Thanks to Buzzy Nielsen for pointing me at StickK.com.)

Posted by jmm at 10:58 PM | Comments (0)

January 13, 2008

All user-contributed, all the time (almost)

I've been fascinated for the past couple of years with businesses that rely on user-contributed content (UCC) for substantial inputs to production. It is sometimes jokingly referred to as the "Tom Sawyer business model": get your friends to whitewash the fence for you, without paying them (in fact, they paid Tom quite handsomely, including "a key that wouldn't unlock anything, a fragment of chalk...and a dead rat on a string"). Tom Sawyer's Whitewash

Randall Stross writes in today's New York Times about two fairly well-known businesses that have nearly perfected the art: Plenty of Fish, and Craigslist. Craigslist is a wide-open classified advertising service where employers post jobs, homeowners sell their old "Monopoly -- Star Wars Version" games and unwanted gifts, and, most piquantly, people of every shape, age, color and preference seek partners for a nearly infinite variety of polymorphously perverse, chaste and romantic interactions. Craigslist is one of the top 10 visited English language sites, has versions for 450 localities in over 50 countries, and runs with only 25 employees. All of the content is written, edited (such as it is) and maintained voluntarily by users; user volunteers also provide most of the customer service through help forums.

Plenty of Fish is more specialized and not quite as successful, but perhaps more remarkable. It is a dating service localized to 50 Canadian, US and Australian cities. Markus Frind created it and devotes only about 10 hours a week to running it...and he only in the past year hired his first employee. Yet the site has 600,000 registered users (which grows rapidly despite purging 30,000 inactives a month), and receives 50,000 new photos per day. Spam-filtering of text is done by software. Filtering of photos (to make sure they are human and clothed) is done by user volunteere: in the past year the top 120 volunteers scanned over 100,000 photos each! The users provide the customer service too, through help forums.

Great business model: have the users whitewash the fence, and you work 10 hours a week for $10 million in annual profits (Stross estimates that Frind's claim about his advertising-only profits is plausible). What are the generalizable principles. How can *I* start such a business and succeed (the road is littered with UCC-driven businesses that never turn a profit).

It is obvious that one of the most important questions is why? Why would users volunteer the time and effort to provide the content, the customer service, the photo filtering, etc.? You may think it's obvious why users want to visit Plenty of Fish: there are a lot of lonely hearts out there. And it is 100% free to users: Frind only charges advertisers. Of course, without user effort, it won't succeed: there will be no information about potential life partners, no help information, and lots of undesirable photos polluting the service. But no individual user needs to contribute anything: there is no requirement for volunteer hours (as there is at our local food coop), there is no public tracking of effort and peer pressure to pull your weight. It's a free-rider's dream.

Contributing content is easy: if you don't submit a profile you aren't going to get any dates. But what about photo scanning? Yes, you want to scan photos anyway: that's why you're there. But why not let someone else filter out the junk so you only have to filter the worthwhile photos? Is there that much of a first-mover advantage that you are willing to filter 100,000 photos per year to have a shot at being the first to contact the newest hunk? My guess is that the expected return on that investment is pretty low.

And why spend your time providing free help service to other users? Maybe Plenty of Fish is lucky to have a demographic for whom the value of time is unusually low (lonely single people with nothing else to do on Saturday night), but that just means the cost is lower to make the contribution: what is the benefit? Is it that the volunteer helpers are trying to be noticed as helpful, well-informed web geeks as a way of attracting dates?

I think the answers to these questions are transparently not obvious. If the answers were easy, we'd have a lot more people working 10 hours a week to make $10 million per year. And the answers are not likely to be something that involves only traditional economic views about incentives and motivations. Developing generalizable principles about the motivations for user-contributed content will surely need to draw on psychological explanations as well, from the psychology of personality and self, and social psychology (at least).

Posted by jmm at 11:03 AM

January 08, 2008

MetaFilter manipulated by nonprofit that reports on honesty and reliability of nonprofits

The New York Times today reported that the Executive Director of a nonprofit research organization manipulated the Ask MetaFilter question service to steer users to his organization's site.

This is particularly piquant because the manipulator founded his organization (GiveWell) as a nonprofit to help people evaluate the quality (presumably, including reliability!) of nonprofit charitable organizations, and GiveWell itself is supported by charitable donations.

The manipulation was simple, and reminiscent of the well-publicized book reviews by authors and their friends on Amazon: the executive pseudonymously posted a question asking where he could go to get good information about charities, and then under his own name (but without identifying his affiliation) answered his own question by pointing to his own organization.

When discovered, the GiveWell board invoked old-fashioned incentives: they demoted the Executive Director (and founder), docked his salary, and required him to attend a professional development training program. Of course, the expected cost of being caught and punished was not, apparently, a sufficient incentive ex ante, but the organization apparently hopes by imposing the ex post punishment he will be motivated to behave in the future, and by publicizing it other employees will be similarly motivated. The publicity provides an additional incentive: the ED's reputation has been severely devalued, presumably reducing his expected future income and sense of well-being as well.

Posted by jmm at 08:23 AM

January 07, 2008

UCC search arrives...manipulation and pollution to follow soon

Jimmy Wales announced the release of the public "alpha" of his new, for-profit search service, Wikia Search. The service is built on a standard search engine, but its primary feature is that users can evaluate and comment on search results, building a user-contributed content database that Wikia hopes will improve search quality, making Wikia a viable but open (and hopefully profitable) alternative to Google.

Miguel Helft, writer for the New York Times was quick to note that such a search service might be quite vulnerable to manipulation:

Like other search engines and sites that rely on the so-called “wisdom of crowds,? the Wikia search engine is likely to be susceptible to people who try to game the system, by, for example, seeking to advance the ranking of their own site. Mr. Wales said Wikia would attempt to “block them, ban them, delete their stuff,? just as other wiki projects do.

The tension is interesting: Wikia promotes itself as a valuable alternative to Google largely because its search and ranking algorithms are open, so that users know more about why some sites are being selected or ranked more highly than others.

“I think it is unhealthy for the citizens of the world that so much of our information is controlled by such a small number of players, behind closed doors,? [Wales] said. “We really have no ability to understand and influence that process.?

But, although the search and ranking algorithms may be public, whether or not searches are being manipulated by user contributed content will not be so obvious. It is far from obvious which approach is more dependable and "open". Wikia's success apparently will depend on its ad hoc and technical methods for "blocking, banning and deleting" manipulation.

Posted by jmm at 09:23 AM